CBE cuts key interest rates by 200 bps amid easing inflation

Updated 8/28/2025 7:29:00 PM

Arab Finance: The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) announced a 200 basis points (bps) cut to key policy rates during its meeting on Thursday, August 28th, marking a measured resumption of monetary easing amid signs of slowing inflation and improving economic activity, the CBE stated.

The CBE’s overnight deposit rate stands at 22.00%, the overnight lending rate at 23.00%, and the rate of the main operation at 22.50%. The discount rate was also lowered to 22.50%.

The decision reflects the MPC’s updated assessment of domestic inflation dynamics and outlook since its previous meeting.

The CBE attributes the recent disinflation to broad-based easing in price dynamics and a sustained tight monetary stance. It expects the downward trend to continue, forecasting inflation to average between 14% and 15% throughout 2025, with projections converging toward the CBE’s medium-term target of 7% (±2 percentage points) by the fourth quarter (Q4) 2026, and further towards 5% (±2 percentage points) by Q4 2028.

Domestically, economic momentum has picked up. The CBE’s nowcast for Q2 of 2025 signals stronger-than-expected growth, with real GDP expanding by 5.4% in Q2 2025 and averaging 4.5% for the fiscal year (FY) 2024/25—nearly doubling the 2.4% growth rate recorded in FY 2023/24. This improvement is largely driven by robust performances in non-petroleum manufacturing and the tourism sector.

Labor market conditions have also shown modest improvement, with the unemployment rate falling to 6.1% in Q2 2025 from 6.3% in Q1.

Globally, signs of recovery continue to emerge, and inflation expectations have remained broadly stable. Central banks in both advanced and emerging markets are gradually easing monetary policy, though cautious in light of ongoing geopolitical uncertainties and volatile commodity markets. Oil prices have experienced slight volatility due to supply shifts, while agricultural commodity prices have shown mixed trends.

Despite the positive outlook, the CBE notes that inflation remains vulnerable to risks, including a potential pass-through of administered price adjustments and heightened geopolitical tensions in the region.

In light of current conditions, the MPC stated that the 200 basis point reduction is consistent with its strategy to maintain a tight yet adaptive monetary policy framework. The goal is to support the disinflation process and anchor inflation expectations.

The committee affirmed its commitment to data-dependent policymaking, noting it will reassess the pace and magnitude of future rate adjustments on a meeting-by-meeting basis, guided by economic developments and the evolving risk landscape.

The MPC reiterated its mandate to ensure price stability and pledged to take all necessary measures to steer inflation towards its medium-term targets.